Budgget Industries, Inc. v. Faber Engineering, LLC

Reversed and Rendered and Memorandum Opinion filed May 15, 2003 Reversed and Rendered and Memorandum Opinion filed May 15, 2003. In The Fourteenth Court of Appeals ____________ NO. 14-02-01076-CV ____________ BUDGGET INDUSTRIES, INC., Appellant V. FABER ENGINEERING, L.L.C., Appellee On Appeal from the 164th District Court Harris County, Texas Trial Court Cause No. 01-47495 M E M O R A N D U M   O P I N I O N This is an interlocutory appeal by appellant Budgget Industries, Inc. (“Budgget”) from the denial of a special appearance and motion to dismiss for lack of personal jurisdiction in a suit by appellee Faber Engineering, L.L.C. (“Faber”) against Budgget. We reverse the trial court’s finding of personal jurisdiction, render judgment sustaining appellant’s special appearance, and order dismissal of appellee’s suit for lack of in personam jurisdiction. PROCEDURAL AND HISTORICAL FACTS In 2001, Devco U.S.A., L.L.C. (“Devco”), an Oklahoma-based conveyor company, contracted with a customer to construct a ship-loading conveyor system to be delivered to Qatar. To deliver on the project, Devco selected Faber, a Texas limited liability company, to design the system, and Budgget, an Oklahoma corporation, to perform certain steel fabrication work necessary to build the system. In October, 2000, senior management at Faber communicated with senior management at Budgget about the project. As a result of these communications, Faber sent a letter to Budgget outlining the services that would be required of Budgget in performing the fabrication work. Faber also sent a purchase order on or about October 11, 2000, to finalize the relationship between the two companies. Neither the letter nor purchase agreement was signed by Budgget. The Faber-Budgget arrangement called for all fabrication services to be performed in Oklahoma and for all completed fabrication work to be shipped to Devco in Oklahoma. Faber was to deliver drawings and instructions detailing Budgget’s required services to Budgget in Oklahoma, perform inspections of Budgget’s work at Budgget’s plant in Oklahoma, and pay approximately $311,000 for Budgget=s completed work. An expeditor from Devco was to remain on Budgget’s premises to monitor Budgget=s progress. In 2001, a dispute arose between Faber and Budgget. As a result of this dispute, Faber sued Budgget for breach of contract, alleging failure to provide certain machined parts within specified time parameters. In response, Budgget filed a special appearance and original answer, contending Budgget was not subject to personal jurisdiction in the State of Texas. On September 30, 2002, the trial court held an oral hearing on appellant’s special appearance. Finding that Budgget had failed to negate all bases of personal jurisdiction in Texas, the trial court overruled appellant’s special appearance and found for appellee. Budgget brings this appeal challenging the trial court’s ruling. ISSUES ON APPEAL Asserting three points of error, appellant argues the trial court erred in finding Budgget failed to negate all bases of jurisdiction in Texas. The company contends (1) despite its limited business relationship with appellee, appellant never submitted to specific jurisdiction in Texas; (2) despite its occasional purchases from Texas, appellant never submitted to general jurisdiction in Texas; and (3) the exercise of jurisdiction by Texas courts over appellant does not comport with traditional notions of fair play and substantial justice.[1] STANDARD OF REVIEW When a defendant challenges a court’s exercise of personal jurisdiction through a special appearance, he carries the burden of negating all bases of personal jurisdiction. Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199, 203 (Tex. 1985); Tex. R. Civ. P. 120a. The reviewing court must affirm if the judgment can be upheld on any legal theory supported by the evidence. Nikolai v. Strate, 922 S.W.2d 229, 240 (Tex. App.CFort Worth 1996, pet. denied). When a personal jurisdiction question is reviewed, the appellate court must review all of the evidence before the trial court relating to the special appearance. Linton v. Air Bus Industrie, 934 S.W.2d 754, 757 (Tex. App.CHouston [14th Dist.] 1996, writ denied). Most courts hold that the proper standard for reviewing the evidence in a case involving a challenge to personal jurisdiction is factual sufficiency. Angelou v. African Overseas Union, 33 S.W.3d 269, 277 (Tex. App.CHouston [14th Dist.] 2000, no pet.); Fish v. Tandy Corp., 948 S.W.2d 886, 892 (Tex. App.CFort Worth 1997, writ. denied). An appellate court may reverse the decision of the trial court only if its ruling is so against the great weight and preponderance of the evidence as to be manifestly erroneous or unjust. In re. King’s Estate, 244 S.W.2d 660 (1951); Runnells v. Firestone, 746 S.W.2d 845, 849 (Tex. App.CHouston [14th Dist.] 1988, writ denied). When, as here, a trial court does not prepare findings of fact and conclusions of law, a reviewing court must presume that all factual disputes were found to be in support of the trial court’s judgments. Garner v. Furmanite Australia Pty, Ltd., 966 S.W.2d 798,802 (Tex. App.CHouston [1st Dist.] 1998, pet. denied). If the special appearance is based on undisputed and established facts, the reviewing court shall conduct a de novo review of the trial court’s order, either granting or denying a special appearance. C-Loc Retention Sys., Inc. v. Hendrix, 993 S.W.2d 473, 476 (Tex. App.CHouston [14th Dist.] 1999, no pet.). DISCUSSION A non-resident defendant must have sufficient contacts with the state of Texas to reasonably require it to be subject to the jurisdiction of the courts of Texas pursuant to the long arm statute. Tex. Civ. Prac. & Rem. Code Ann. ' 17.042 (Vernon 1997); Zac Smith & Co. v. Otis Elevator Co., 734 S.W.2d 662, 663 (Tex. 1987). The requirement of sufficient contacts invokes federal due process guarantees that the exercise of jurisdiction by the forum state not offend “traditional notions of fair play and substantial justice.” Id. (citing International Shoe Co. v. Washington, 326 U.S. 201, 316, 66 S. Ct. 154, 158 (1945)). Jurisdiction may be exercised where a foreign defendant has “fair warning” that a particular activity may subject it to the jurisdiction of the forum state. Zac Smith, 734 S.W.2d at 663 (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S. Ct. 2174, 2181B82 (1985) and Shaffer v. Heitner, 433 U.S. 186, 217, 97 S. Ct. 2569, 2587 (1977)). Such “fair warning” may be established through either specific jurisdiction or general jurisdiction. Zac Smith, 734 S.W.2d at 663. See also Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 413B14, 104 S. Ct. 1868, 1872 (1984) (personal jurisdiction exists if the non-resident defendant’s minimum contacts give rise to either specific or general jurisdiction); BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 795B96 (Tex. 2002) (same). Neither is present here.[2] 1. Specific Jurisdiction Specific jurisdiction is established if a defendant’s alleged liability arises from or is related to an activity conducted within the forum state. CSR Ltd. v. Link, 925 S.W.2d 591, 595 (Tex. 1996); Schlobohm v. Shapiro, 784 S.W.2d 355, 358 (Tex. 1990). The court must focus on the intentional activities and expectations of the defendant in deciding whether there is jurisdiction. Id. at 357. To establish specific jurisdiction, a defendant must do something “purposeful” to avail himself of the privilege of conducting activities within the forum state, thus invoking the benefits of its laws. Hanson v. Denckla, 357 U.S. 235, 253, 78 S. Ct. 1228 (1958). See also Hydrokinetics, Inc. v. Alaska Mechanical, Inc., 700 F.2d 1026, 1028 (5th Cir. 1983). The defendant’s “purposeful availment” is determined by considering the quality, nature and extent of the defendant=s activity in the forum; the foreseeability of consequences within the forum from activities conducted outside it; and the relationship between the cause of action and the defendant’s contacts. Id. A defendant’s activities must justify a conclusion that the defendant reasonably anticipated being called into court in the forum state. See World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567 (1980). It is the actions of the defendant, not the plaintiff, which are relevant. Kulko v. California Superior Court, 436 U.S. 84, 93B94, 98 S. Ct. 1690, 1997B98 (1978). A plaintiff’s unilateral actions in soliciting a contract or in carrying out the terms of a contract are irrelevant. Hanson, 357 U.S. at 253, 78 S. Ct. 15 1240; Hydrokinetics, Inc., 700 F.2d at 1028; U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 763 (Tex. 1977). Here, we find appellant did not “purposefully avail” itself of Texas laws. There is no evidence the company advertised in Texas, conducted a direct mail campaign in Texas, or solicited business in Texas in any way. Indeed, over the past ten years, 98 percent of Budgget’s annual revenues have been earned from work done for clients situated in Oklahoma; Faber is the only Texas company from which Budgget has earned any revenue at all and this revenue resulted from the project at hand. With regard to the Qatar project, facts demonstrate Devco and Faber approached Budgget to establish a working relationship, not the other way around. Budgget performed its project activities in Oklahoma; performed its fabrication work at its facilities in Oklahoma; received appellee’s designs, specifications and instructions in Oklahoma; conducted its communications with appellee via telephone or personal visits in Oklahoma; made delivery in Oklahoma; and received payment by hand delivery in Oklahoma. Additionally, no one from Budgget traveled to Texas in connection with the project; only Oklahoma entities were hired as subcontractors; and Devco’s expediter, who monitored Budgget’s performance and progress on the project, conducted his activities in Oklahoma. The only evidence appellee has provided to suggest appellant “purposefully availed” itself of Texas law is that (1) appellant accepted a purchase order from Faber, a Texas limited liability company; (2) appellant’s performance was linked to design specifications created by Faber in Texas; and (3) appellant purchased materials from two Texas suppliers for the project. We find such evidence to be unpersuasive. First, the mere fact that Budgget entered into an agreement with Faber, a Texas corporation, does not perforce bring Budgget within the jurisdiction of a Texas court.[3] Texas courts have repeatedly recognized that personal jurisdiction is not justified by the single fact that a non-resident contracts with a Texas resident. J.D. Fields & Co., Inc. v. W. H. Streit, Inc., 21 S.W.3d 599, 604 (Tex. App.CHouston [1st Dist.] 2000, no pet.); Electrosource, Inc. v. Horizon Battery Technologies, 176 F.3d 867, 872 (5th Cir. 1999) (applying Texas law).[4] Next, Faber’s development and design of specifications for the conveyor system is irrelevant for the purpose of determining whether Budgget is subject to jurisdiction in Texas. Faber did not to create its drawings as part of the contract; rather, Faber created its drawings as a predicate to the contract.[5] Indeed, Budgget was not desirous of acquiring Faber’s drawings; rather, Budgget was desirous of acquiring Faber’s businessCto do this, it necessarily had to perform according to Faber’s specifications. The unilateral activities of a plaintiff soliciting a contract or carrying out the terms of a contract cannot satisfy the requirement of contact with the forum state. Hanson, 357 U.S. at 253, 78 S. Ct. at 1240; Hydrokinetics, Inc., 700 F.2d at 1028; U-Anchor Advertising, Inc. 553 S.W.2d at 763.[6] See e.g. 3-D Elec. Co., Inc. v. Barnett Constr. Co., 706 S.W.2d 135, 142B43 (Tex. App.CDallas 1986, writ ref=d n.r.e.) (finding no specific jurisdiction over Tennessee company where third party initiated the contract, even though the defendant had a contract with a Texas resident, conducted price negotiations by telephone and facsimile with a Texas resident, and preliminary design work was performed by a Texas resident). Finally, the fact that Budgget purchased components and supplies from two Texas vendors does not amount to contact sufficient to subject a nonresident to personal jurisdiction. See Helicopteros Nacionales, 466 U.S. at 418, 104 S. Ct. at 1874 (no personal jurisdiction despite helicopter company’s purchases of approximately 80 percent of its fleet from Texas). Neither a contract with a Texas resident, nor a payment made to Texas is sufficient to justify personal jurisdiction over a non-resident defendant. J.D. Fields & Co., 21 S.W.3d at 604. We sustain appellant=s first point of error. 2. General Jurisdiction General jurisdiction is found when a non-resident defendant’s contacts with a forum are “continuous and systematic,” allowing the forum state to exercise personal jurisdiction even if the cause of action did not arise out of the contacts with the state. CSR, Ltd., 925 S.W.2d at 595. A finding of general jurisdiction requires a non-resident defendant to have a higher level of “contacts” with the forum state than those required for a finding of specific jurisdiction. Dalton v. R&W Marine, Inc., 897 F.2d 1359, 1362 (5th Cir. 1990). Here, we find no evidence of “continuous and systematic” contacts on the part of appellant with the state of Texas. Indeed, Budgget is not a resident of Texas; it does not maintain a registered agent for service in Texas; it does not engage in business in Texas; and it has not committed any tort within Texas. Additionally, appellant does not maintain a place of business in Texas, it does not maintain a bank account in Texas, and it does not employ servants, agents or employees in Texas. See Helicopteros Nacionales, 466 U.S. at 414, 104 S. Ct. at 1872; Tex. Civ. Prac. & Rem. Code ' 17.042. Appellee contends, however, that general jurisdiction may be asserted over Budgget because (1) Budgget makes routine telephone calls to Texas businesses and residents; (2) Budgget purchases raw materials from companies located in Texas; (3) Budgget once bid for work from a Texas company; and (4) Budgget makes occasional deliveries in Texas. We find such evidence to be unpersuasive. First, appellant’s telephone calls to Texas have arisen in only three situations: (1) from personal calls made by Budgget’s president; (2) from orders of raw materials made by Budgget of Oklahoma companies that maintain offices in Texas; and (3) from purchases of warehousing services to facilitate transport of fabrication product to Texas. Absent other contact, such minimal telephone calls fail to subject Budgget to the jurisdiction of Texas courts. See Hydrokinetics, Inc., 700 F.2d at 1029 (finding exchange of communications between defendant and plaintiff to be insufficient to bring defendant within jurisdiction of Texas courts). Second, appellant’s purchases of raw materials from Texas companies have been made in only two situations: (1) when Oklahoma companies have rerouted Budgget to their Texas offices; and (2) when Texas companies have offered specialized products not available in Oklahoma. Such purchases of goods and services from a forum state, even at regular intervals, is not by itself enough to subject a nonresident defendant to general jurisdiction. Helicopteros Nacionales, 466 U.S. at 411B12, 104 S. Ct. at 1870B71. Third, appellant=s one bid on a Texas job was made pursuant to a lead forwarded by an Oklahoma supplier and it did not result in business. Such a one-time contact can hardly be called “continuous and systematic”; thus, we conclude general jurisdiction will not lie based on this evidence. Finally, while Budgget concedes it has made deliveries to companies in Texas, testimony indicates the deliveries were never made to customers or companies that paid for the product. Rather, Budgget’s deliveries to Texas have occurred only in response to requests by Budgget’s Oklahoma customers to deliver to sites located in Texas.[7] Title has always passed in Oklahoma. We conclude Texas courts have no general jurisdiction over Budgget. Accordingly, we sustain appellant=s second point of error. 3. Fair Play and Substantial Justice Because we conclude the trial court erred in denying Budgget’s special appearance, we need not determine whether imposition of personal jurisdiction over appellant offends the traditional notions of fair play and substantial justice. See Burger King Corp., 471 U.S. at 475, 105 S. Ct. at 2184; Zac Smith, 734 S.W.2d at 663; Reyes v. Marine Drilling Companies, Inc., 944 S.W.2d 401, 405 (Tex. App.CHouston [14th Dist.] 1997, no writ). Accordingly, we do not address appellant’s third point of error. * * * * Having reviewed all evidence before the trial court relating to appellant=s special appearance and having found appellant negated all bases of personal jurisdiction, we reverse the trial court’s finding of personal jurisdiction, render judgment sustaining appellant’s special appearance, and order dismissal of appellee’s suit for lack of in personam jurisdiction. /s/ John S. Anderson Justice Judgment rendered and Memorandum Opinion filed May 15, 2003. Panel consists of Justices Anderson, Seymore, and Guzman. [1] In its brief and at trial, appellee asserted appellant waived its special appearance by filing an answer and affirmative claim for attorney’s fees. We disagree. Because appellant’s original answer was filed subject to the trial court=s ruling on its special appearanceCand because appellant=s request for attorney’s fees was included in the prayer of its original answerCappellant’s filing of an original answer in conjunction with its special appearance did not waive its special appearance. See Tex. R. Civ. P. 120a(1); Koch Graphics, Inc. v. Avantech, Inc., 803 S.W.2d 432 , 433 (Tex. App.CDallas 1991, no pet.) (it is only after the court has ruled against a special appearance that it has jurisdiction to consider an original answer). [2] Although the trial court seems to have focused on specific jurisdiction in determining whether Budgget is subject to personal jurisdiction in Texas, this court will consider both specific and general jurisdiction because either will subject Budgget to the jurisdiction of Texas courts and appellant has appealed on both grounds. [3] There are two pieces of evidence suggesting a contract between the two parties: (1) a letter from Faber to Budgget detailing the Qatar project; and (2) a purchase order from Faber to Budgget placing an order for Budgget’s services. Because an accepted purchase order can form the basis of a contract, we conclude there was indeed a contract between Faber and Budgget. See Mid-South Packers, Inc. v. Shoney’s, Inc., 761 F. 2d 1117, 1121 (5th Cir. 1985); Fleetwood Const. Co., Inc. v. Western Steel, 510 S.W.2d 161, 163 (Tex. Civ. App.CCorpus Christi 1974, no writ). The contract was executed in Oklahoma when Budgget commenced work and “accepted” Faber’s offer to buy services. [4] Appellant argues the instant case is analogous to Cartlidge v. Hernandez, 9 S.W.3d 341, 347 (Tex. App.CHouston [14th Dist.] 1999, no pet.) (finding “substantial connection” to Texas and sufficient minimum contacts with Texas where out-of-state attorney, after being approached by Texas residents, contracted with the residents and performed services outside Texas). We disagree. In Cartlidge, the defendant negotiated with clients and sent generic employment/retainer contracts to Texas residents without specifying he would only provide representation in Nevada. Here, appellant negotiated with Devco, an Oklahoma company, and in the only writing memorializing the projectCthe letter from Faber to Budgget dated October 10, 2000Cit was specifically provided that Budgget’s obligations were to be performed in Oklahoma. [5] The contractCas evidenced by the purchase orderCcalled for Budgget to fabricate conveyor components “in accordance with . . . Faber-issued shop detail drawings” and called for Faber to pay Budgget $311,691.25. [6] Appellee claims Budgget was “doing business” in Texas pursuant to the Texas Long Arm statute because Budgget (1) contracted with Faber, a Texas “resident,” and (2) Faber performed at least a portion of its obligations under the contract in Texas. See Tex. Civ. Prac. & Rem. Code Ann. ' 17.042(1) (a party “does business” in Texas if it contracts by mail or otherwise with a Texas resident and either party is to perform the contract in whole or in part in this state). We disagree. First, Budgget did not contract with Faber for design services, Devco did. Budgget contracted with Faber for remuneration that was to take place in Oklahoma. Any design activities conducted by Faber were to be performed under its contract with Devco for the purpose of defining the fabrication services required of Budgget. [7] According to appellant’s testimony, this happened approximately three times in 2001.